Officials at Waterbury Hospital, Bristol Hospital, and the Eastern Connecticut Health Network, which operates Manchester Memorial Hospital and Rockville General Hospital, are touting plans to sell their nonprofit community hospitals to Vanguard Health Systems of Nashville, Tenn., a profit-seeking company that owns 28 other hospitals. The acquisitions, the hospitals being sold say, will guarantee continued great service to their communities. ECHN’s radio advertisements declare, “That will never change.”
This assurance by the sellers of the four Connecticut hospitals that they know how the new owners will manage things forever is ridiculous. Vanguard will make no promises enforceable in court. And even as Vanguard is acquiring the four hospitals, it in turn is being acquired by still another profit-seeking hospital company, Tenet Healthcare Corp. of Dallas, which owns 49 hospitals around the country. Tenet isn’t promising anything either.
What’s really happening here is not an eternal guarantee of community service but more destruction of competition in medical care, a process described in detail by a senior fellow at the Manhattan Institute for Policy Research, Avik S.A. Roy, in commentary published in the August 5 edition of National Review magazine and reprinted by the Journal Inquirer on August 17.
Roy blames the rapid increase in the nation’s medical costs largely on this destruction of competition among hospitals. The average hospital stay in the developed world costs $6,222, Roy writes, but in the United States the average stay costs $18,142, even though the average stay in the United States is only five days long, two days shorter than the average in other developed countries.
Roy adds that the federal government’s measure of market concentration, the Herfindahl-Hirschman Index, now categorizes most hospital markets as “highly concentrated,” but the U.S. Justice Department and the Federal Trade Commission hardly ever bring antitrust law to bear against hospitals, probably because they politically exploit their image as “instruments of charity” and “nonprofit pillars of their communities.”
Meanwhile, Roy writes, hospitals are acquiring private medical practices “because it lets them control the patients whom private physicians see. Independent physicians can refer their patients to any hospital that accepts their insurance. Hospital-affiliated doctors are required to refer patients to the hospitals they work for.”
Indeed, Vanguard conditioned its acquisition of Waterbury Hospital on new state legislation authorizing it to acquire medical practices. Though his office helped negotiate the bill, Governor Malloy unexpectedly vetoed it out of concern that it might cost jobs. The governor elaborated that Connecticut needs more study of hospital acquisitions.
State law already addresses such acquisitions specifically and authorizes the attorney general and health commissioner to regulate and even block them, but only in regard to the disposal of hospital assets and assuring continuity of service. Attorney General George Jepsen seems uninterested in the far bigger issue here, the destruction of competition in medicine, over which he has direct authority as enforcer of Connecticut’s own antitrust law.
Hospitals should not be allowed to consolidate their industry and gain control of physician practices so they can drive up costs, diminishing the public’s alternatives. As a major underwriter of medical costs — the insurer of tens of thousands of its own employees as well as welfare recipients — state government has its own huge financial interest in preserving medical competition.
The study of this issue that the governor notes is required isn’t going to happen by itself with the General Assembly adjourned until January. It’s up to the attorney general to get it started with the antitrust law enforcement that the federal government, in thrall as always to moneyed interests, has defaulted upon.
Chris Powell is managing editor of the Journal Inquirer in Manchester, Conn.